Procurement’s value-based approach to legal services
Procurement has managed to establish a stronghold with regard to involvement in the purchasing of most categories ranging from consulting to logistics. However, its involvement in the sourcing of legal services still remains a challenge. This is based on the false premise that procurement’s strategies should not apply to categories where sourcing is more relationship based like legal services.
In the past 5 years, procurement’s involvement grew in sourcing legal services. In 2013, procurement influenced about 17-19% of the total legal budget and the number rose to 25% in 2015 for Fortune 500 companies. This has helped them to reap greater dollar savings which is expected to increase exponentially in future.
A prioritization framework tool needs to be built to highlight the practice areas. The primary focus should be on building advocacy and practice areas which are less business critical. To determine this approach, spend levels should be taken into consideration.
Procurement must have a clearly demarcated strategy and value proposition in place to influence sourcing of legal services. They must combine their elements of strength such as robust procurement and supplier management fundamentals along with knowledge of legal billing structures and value derived from alternate fee arrangements.
To build internal advocacy, procurement department should interact with lawyers and reinforce their value composition. Legal personnel in corporate legal departments value their relationship with outside counsel. Therefore, procurement department to win their trust should avoid referring to law firms as “suppliers”.
Procurement’s new-found approach of segmenting the different practice areas and addressing them will help improvise the process and also drive savings. In addition to their fundamental approach, procurement can add more value by including analysis and strategy with knowledge of practice-area specific trends and alternate fee arrangements.
Once the procurement team succeeds in building advocacy and wins the trust of the legal stakeholders, a successful collaborative partnership can be developed to drive value and reap benefits in future.
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